The Truth About Debt Consolidation

hey guys that welcome to freedom in a
budget I am Kelly this is an interesting topic this is all you need to know about
debt consolidation is it good is it bad yeah this is an interesting topic this
is a hot topic this is a controversial topic I don’t even know what I’m talking
about this but it’s important it’s something that we need to talk about so
I just want to preface this by saying that I am currently debt-free I do not
have any debt I paid off all of my student loans my car is paid off I don’t
have credit cards and I am living cash I spend cash I use my debit card in cash
but I do not believe in debt we will be having a mortgage in a few years but I
do not have any other debt or any debt right now so I’m speaking from this for
someone that has paid off all their loans has cash flow at a wedding and I
did not use debt consolidation to do it I know that some people they think that
debt consolidation is a lifesaver and that’s you know how it got them out of
it but I really want you to know exactly what you’re getting yourself into a lot
of people think that it’s just to get out of free jail free card and it’s just
the answer to your prayers well it’s it can be interesting so we’re gonna go
through some facts we’re gonna go through some hard topics gonna give some
examples of what it means and what what that would mean for you you know
realistic speaking Liam do you say I have this then let’s let’s break it down
and what it’s gonna cost number one in debt consolidation is a refinance loan
with extended payment terms what does that mean you are extending the length
of your debt yeah that’s that’s kind of hard to swallow so many people are like
oh we’re just we’re you seeing an interest but do you realize you’re
paying more down the road later on years more later on number two a lower
interest rate is not always guaranteed when you consolidate that is a huge
misconception everyone thinks that like oh
reconsolidation lower interest rate not always you have to really really be
careful debt consolidation is not debt elimination that is a huge misconception
and finally debt consolidation is different from debt settlement
both can scam you out of thousands of dollars thousands all right so let’s
break this down a bit so debt consolidation insurance rates don’t
always see the same a lot of times they’re into a introductory interest
rates so you are signing on at 6% interest where before you’re paying 15
yeah that may sound great but it may be just for a year and after that year that
is gonna spike back up so you have to be really careful that if you do do this
that it is a constant interest rate and not just for introductory period a
really big big misconception with debt consolidation is your money behavior
doesn’t change and this is a big thing a lot of people they’ll consolidate their
debt and though they’ll see it is this huge win I just you know got rid of all
of this and I lowered my interest rate in all of this but then they go right
back in their habits it’s not the big wins that you get when you pay off a
loan when you pay off a loan I paid off my student loans when you pay off a loan
you get that high that this is awesome I want to keep fighting I want to do this
and this and this and this and you’re really just in the game when you pay off
a or when you consult your debt a lot of times you pounds up but you haven’t done
anything then you’re gonna go right back to your old habits you have to be really
really careful that you’re not getting into that trap and that bad mindset if
I’m just going along and then you’re gonna get right back in there and take
on more debt all right so here is a scenario for you that I’m gonna read and
it’s kinda opening like really eye-opening I was a little scared when I
read it so it says let’s say you have $30,000 of unsecured debt this debt
includes two loans for $10,000 at 12% interest in a four-year loan for $20,000
at 10% interest your monthly debt payment for the first loan is five
hundred $17 and the payment for the second loan is $583 you consult a
company that promises you to lower your payments to six hundred forty dollars a
month and your interest rate is only nine percent that’s awesome right I’m
cutting my payments my interest rate is lower this is great guys why isn’t
everyone signing up why I don’t get it well so
you’re interested 9% by negotiating with your creditors and rolling your two
loans together into one sounds great doesn’t it
who wouldn’t want to pay 406 dollars less per month and payments yeah here’s
the downside you’re adding six years to your loan yeah you don’t realize that
when you consolidate and when you combine those loans you’re almost taking
on a whole new term so before you only had two years to pay this off now you’re
at six years so in the end your would pay more money if that’s not bad enough
you’ll end up shedding out forty six thousand and eighty dollars to pay off a
new loan versus forty thousand three hundred ninety two dollars so you saw
you’re paying less because your monthly payments were worth less but you really
pay more because of the interest rate in the in the six years versus the two
years for the original ined even though the interest rate was nine
percent and now you’re paying six percent you are paying five thousand six
hundred eighty eight dollars more sounds like a ripoff to me so guys if you had
to be so careful I really want you to be educated I want you to know I don’t want
you just to jump into it without during your research without doing your
homework without saying is this gonna cost me more in the long run do the math
run the numbers make sure you’re looking at all the fine print what’s the
interest rate is it going up over time how long is it extending the loans for
those are really important questions to ask really important so I just want to
give you all of the facts let me know if you have any questions starting the
discussion down in the comments I’d love to hear from you guys I’d love to go
back and forth for you guys and it’s it’s an interesting topic so and we’ll
talk to you guys later bye

20 thoughts on “The Truth About Debt Consolidation

  • I think it’s really sad that a lot of people fall into debt consolidation because they don’t know what else to do. I know that when I was in major debt with my ex-husband, we could not even qualify for a debt consolidation loan though. I guess probably a good thing!

  • I ran into a problem with debt in the past and went to a debt consolidation and wish I would have just filed for bankruptcy. It took me 6 years to pay off and my credit didn’t start recovering until I was paid off where if I would have filed bankruptcy I wouldn’t have had to wait so long to rebuild my credit~~~Sandy

  • I have never done this, but I have done zero percent for 12 months on appliances. I paid it off earlier.

  • 31 Years ago my husband was out of work for 9 months and we used our credit cards to make ends meet. We had several cards and the payments were killing us barely making minimums and paying 18-21% interest. Once he found a job, we went to our bank, took out a bank loan that covered them all and used our car as collateral since it was ours. The loan was for 3 years but we took the extra monthly money and put it against the balance each month along with extra and paid off the entire amount in 18 months. Our total amount of debt was $7000 on 5 different cards. This wouldn't work for everyone. But the bank % was much less than credit card, we closed the credit card accounts except for 1 and never looked back. My parents taught me it is wrong to file bankruptcy because you created the debt, it is your place to pay it off, even if you have to take a second job. I understand it is much different today, but this is our story. We have never carried credit card debt since, or any other debt. Once the loan was paid, we started applying that to our house. Truly the borrower is slave to the lender. Enjoy your posts.

  • Debt consolidation can certainly be a bait and switch product. I learned from my mom's experience with credit cards to never consolidate. It usually ends up hurting more than helping (at least from what I've seen). Thanks for sharing

  • Great points…years ago I went to a debt consolidation ""counselor""…well not much counseling went on, I realized pertty quickly the older woman setting arcoss from me knew less about managing money then I did…I ran 🏃. After the much research and prayer I discovered uncle Dave, lol and debt snow ball it was. Debt consolidation in my opinion is never the answer it doesn't get to the root of the issue which in most cases is behavior.

  • Debt consolidation does not help with getting rid of debt in most cases… for me it just gave me the ability to add more to my debt total. Currently debt consolidation loans make up 21.6% of my overall debt – it would be a higher portion of my debt if the student loans weren't so big. (Kelly – feel free to do the maths on what that percentage works out to dollarwise from previous email discussions).
    Here in NZ, credit laws require financial institutions to give a clear breakdown of what the loan will cost you over the course of the loan if you don't make extra payments, so it's rare to have a introductory rate. Most are officially on a floating rate but in my experience, this rate doesn't actually get changed often and even when it does, it's normally only 1-2% maximum – based on changes to the country's Official Cash Rate.

  • Hello! I have a question about payday loans. I am currently in way over my head with them and I really dont know what to do. If you have any company in mind to help with payday loan consolidation I would greatly appreciate it.

  • But the whole idea is to clear your bills that is sitting there not getting paid. I will rather pay $500 more than keep hvg late fee coming from every angle. And the interest are different that you getting hit with from different credit cards.
    Just saying

  • Good video. But some people who can't afford to pay $1000 month in debt would much rather lower their payments to $400 per month and instead make the $6000 payment to a company for helping them manage this in the long run. At least that's how I see it.

  • I have 8 credit cards all over the credit limit and I get charged 25% interest rate on EVERY card. I literally pay $800 a month on credit card payments and my balance keeps going up.

  • Oh HOW great would it be to have EVERYTHING paid OFF and give everybody this scary vision of Debt consolidation,..thank you for your wisdom as a debt FREE person, share NOTHING with the rest of is,..what a piece of SHIT video

  • My idea with doing debt consolidation is to get a lower interest rate and pay more than the minimum. Just because it's a 6 year loan doesnt mean I need to take 6 years to pay it off.

  • Great video. Thanks for sharing. It is really helpful to me. The video that you have shared on debt consolidation is really interesting information that you have shared. so here you can avail that Individual Voluntary Arrangement/IVA UK/IVA debt help are debt solutions for England, Wales, and Scotland debtors to write off debts and lead a debt free life.

  • In the scenario you brought up. What’s another 5k over the course of 4 years. In the time that you have a lower payment. You can save up and then just pay it off before that time comes. So lower payment and interest rate are more manageable long term than higher payments higher interest rate in the short term. Just seems to make more sense to save when you can and pay off early.

  • So my question is this, If i am looking to take out personal loan for $13,000. To pay off all my credit cards/medical debt. = into 1 payment. That i have to worry about and only have 1 interest rate. Is this a good idea? Its literally cutting my APR % by 1/2 from 20%+ into 13%. After that I am giving my wife all credit cards, and having her lock it up and only use it if the house is on fire.

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